Supply chain resilience - The case for understanding the ROI in resilience

Blog post   •   May 13, 2016 16:23 BST

Supply chain resilience is a topic that has been debated considerably over the last few years, which has resulted in attempts by various institutions to provide guidance on or standards for discrete elements of the topic. Ensuring greater resilience in your supply chains creates a greater value for money proposition than a supply chain that is fragile and frequently creates disruptions to your business. Understanding exactly what you are paying for in terms of resilience, and using that knowledge to create appropriate levels of investment in supply chain resilience, will give you a competitive advantage.

Procurement includes the management of risk within the category of spends or market being managed by the procurement professional. Supply chain resilience is a component part of overall organisational resilience and contains within it, elements of risk management and business continuity management. Procurement includes all of these components and more, taking into consideration such components as financial resilience, human resources, health and safety, fraud, slavery, sustainability and corporate social responsibility.

For example, what is the appropriate way to analyse the current levels of resilience within your supply chain, for those you are in contractual relationships with? How will you migrate future procurement competitive bidding processes to include resilience assessed total cost of ownership?

How can you add value by exposing the costs associated with investment in resilience within your supply chains and make a calculated informed judgement as to if you are paying the appropriate costs, too much or too little.

Undertaking a more objective calculation of the risks in your supply chain to understand the onerous costs of a supply chain disruption and the cost benefit analysis associated with reducing the chance of a disruption or recovering from one.

How to utilise good practice when analysing the market and going through prequalification to achieve shortlists?

Understanding the costs associated with service level agreements for business as usual within a contractual arrangement and expectations of service during a disruption. Calculating the costs and the cost benefit of adding specific risk and business continuity terms and conditions within a request for offers be it quotations or formal tenders, public sector or private sector and how will this affect you as a bidder?

What methodology would you undertake to utilise resilience as a distinguishing factor when undertaking bid analysis, negotiations and best and final offer due diligence?

How do risk mitigations and continuity responses feature in supplier relationship management and are they embed in contractual relationships appropriately and adequately reflected in supplier relationship management information, through self -assessment or quality audits.

Finally will your internal or external auditors in undertaking an audit of supply chain resilience give you a clean bill of health on managing risk and continuity issues appropriate to your corporate objectives and corporate risk appetite? Does your corporate attitude to risk and continuity reflect the wishes of your 'Top Management' Executives and Audit Committees

David J. Window is a CIPS Senior Consultant and Head of Supply Chain Resilience. Discover more about the return on investment of supply chain resilience during David's BCAW webinar on the 16th May. Click here to register.